June 24, 2016

Brexit was a "Black Swan" election

Several years ago Nassim Nicholas Taleb introduced the concept of the "Black Swan" - an unexpected event that wreaks havoc on markets. Note that it need not be unlikely, it simply was not anticipated.

Which brings us to Brexit.

There was plenty of reason to believe the Brexit vote would succeed. Discontent with the EU was widespread and its failures were many. Yet elites of all parties assumed that by using their usual tools - the traditional media, key endorsements and of course their authority as powerful figures - they could control the situation.

The mechanism seemed straightforward: Offer the British people a simple "in or out" vote and when it failed, the question would be forever resolved.

The people had other ideas.

I've probably said this before but all of our predictive models for politics are built by trying to predict the past and then extrapolating it to the future. Assuming things change only incrementally, they are reasonably effective.

But what happens when the change is more than incremental? What if the elites - secure in the power, blinded by their own self-image - don't realize just how much things have shifted?

In that case, the models won't work, the calculations will fail and the system will collapse.

For those who live in elite world, life is pretty good. Cars are getting more advanced, gadgets allow you to automate your home and you can watch whatever you want whenever you want to watch it.

There's a Whole Foods on the corner and the latest i-device in your pocket.

The official statistics show the economy is doing fine and unemployment is down, so the rubes out in the hinterland should be happy - and they would, if they weren't such backwards haters, obsessed with sodomy, promoting rape and clinging to their guns and their God.

What these people have missed is the fundamental transformation that has taken place. I live in a liberal college town (but I repeat myself) and thus the majority here is naturally sympathetic to the liberal agenda of public works and tax increases for worthy causes.

And yet, the public is discontented. They are voting down education millages - a thing unheard of only a few years ago. The streets are overdue for repairs, the municipal budget stretched to the limit by retiree benefits and the empty storefronts keep increasing.

All of this is hidden to the elites who look at base Democrat turnout and figure that it's a safe area and unworthy of concern.

But Bernie Sanders won big here, and he was nothing if not a protest vote against business as usual. Even in this stronghold of liberalism, cracks are appearing. People love diversity, but they fear that inadequately screened foreign students might spread dangerous diseases in the schools.

This is happening all over the country, and it is why the old rules no longer apply.

Brexit should have failed, and it was designed to fail, but it didn't. The same process is happening here as well, and the results come November may prove just as stunning to the people who claim to be running the show.